ANAND PRAKASH, A.M. ORDER IT Appeal No. 11 raises issue of validity of partial partition of assets of undivided family of Shri Sohan Singh Dhingra , and date of which such partition, if any, took place. Income-tax appeal No. 2919 questions inclusion of sum of Rs. 21,000 in total income of family on basis of finding of ITO that partial partition in question was not recognisable under law. 2. facts, on basis of which present controversy arises may be noted. Shri Sohan Singh Dhingra is Karta of HUF consisting of himself, his wife Smt. Amrit Dhingra and his minor son, Master Harnam Singh Dhingra. said family owned some immovable and movable properties. On 30th Dec., 1978, declaration was made in writing by said Shri Sohan Singh Dhingra in presence of two witness that he was making partial partition of his HUF, insofar as he wanted to give Rs. 50,000 to his minor son, Master Harnam Singh Dhingra and another sum of Rs. 1 lakh jointly to himself and his wife. relevant clauses job said declaration read as below : "1. That, I, Sohan Singh Dhingra along with my wife Mrs. Amrit Dhingra and minor son Master Harnam Singh Dhingra, constitute HUF. 2. That I am Karta of said HUF. 3. That said HUF owns both movable and immovable properties. 4. That said HUF owns movable property in shape of capital investments in various partnership concerns and personal books of said HUF are being maintained. 5. That I of my own free will volition and with previous consent of my said wife Mrs. Amrit Dhingra and with consent of other relatives and well wishes of family took out sum of Rs. 1,50,000 out of capital investment in personal books of said HUF, namely, Shri Sohan Singh Dhingra (HUF) and divided it and partitioned it amongst coparceners of HUF as under : 6. That sum of Rs. 50,000 (Rupees fifty thousand only) was allotted to my minor son Master Harnam Singh Dhingra and he is now at liberty to enjoy fruits thereof in his own right and title. 7. That my wife showed her intention to continue to be joint with me and thus Rs. 1,00,000 was allotted to me and my wife jointly and this amount shall continue to be joint in status of HUF constituted by me and my said wife Smt. Amrit Dhingra of which I shall be Karta. 8. That this partial partition relates to sum of Rs. 1,50,000 taken out of capital investment of HUF in name of Shri Sohan Singh Dhingra (HUF) in personal books and balance capital investment in personal books and all other movable and immovable assets shall continue to be jointly owned by said HUF constituted by me, my said wife Smt. Amrit Dhingra and my minor son Master Harnam Singh Dhingra and I shall continue to be Karta of HUF, as heretobefore. 9. That this partition was carried out by passing necessary entries in books of Shri Sohan Singh Dhingra (HUF), Amritsar on 30th Dec., 1978. 10. That each of coparceners have been put in possession of sums allotted to each of them as above and each is at liberty to enjoy fruits thereof in his/her own right and title. "(Emphasis, italicised in print, supplied) From portions italicised above, impression sought to be given is as Rs. 1,50,000 were taken out of capital investment and each of coparceners t o whom amounts in question were intended to be given were 'put in possession of sums allotted to each of them'. physical taking out of money from assets of assessee-HUF, and physical handing over of same to members concerned, however, did not take place. What was done by assessee was to make entry on debit side of capital account of HUF on 30th Dec., 1978 showing that Rs. 50,000 were to be credited to Master Harnam Singh Dhingra and Rs. 1 lakh were to be credited to Shri Sohan Singh Amrit Dhingra. relevant entries in capital account were to following effect : Debit Credit By 1st balance April, brought 2,14,016.39 1978 forward of last year 29th To July, insurance 508.00 1978 premium paid To insurance 508.00 premium To amount transfer to 30th following Dec., accounts for 1978 which partial p r t i o n has been effected : 50,000 Master Harnam Singh Dhingra 1,00,000 Sohan Singh Amrit 1,50,000.00 Dhingra 1,51,016.00 To 63,000.392 balance 2,14,006.392 2,14,006.39 aforesaid capital balance in books of HUF was in fact matched on assets side by various assets, investments, etc., held by assessee and indicated family's net worth as today. No specific asset was taken out and divided by assessee as on 30th Dec., 1978. what was done by him was, as learned chartered accountant of assessee put it, to create claim of Rs. 1,50,000 against HUF in favour of divided coparceners. It was net wealth of HUF which, according to him was reduced by Rs. 1,50,000 as on 30th Dec., 1978 on account of creation of two debts as above against family. 3. Subsequently on 2nd April, 1979, investment of assessee in UK Paint Industries, Amritsar was divided between Shri Harnam Singh Dhingra, Shri Sohan Singh Dhingra and Smt. Amrit Dhingra as above. relevant entries in books of UK Paint Industries, passed to give effect to above distribution were to following effect : Date Particulars Credit Date Particulars Debit Rs. Rs. To amount transfer to account of Last year 1979 26,824.06 1979 master Harnam account Singh Dhingra account No. 2 50,000.00 P. P. To amount transfer By to account of amount transfer Shri Sohan from New Delhi 1,23,175.94 Singh Dhingra factory account (Amrit Singh) H. 1,00.000.00 4 f.a/c No. II 4 . On basis of aforesaid facts, ITO gave finding that partition in question took place on 2nd April, 1979. observations of ITO on this point were as below : "Since entries for division of capital of Rs. 1,50,000 have been made on 2nd April, 1979 in capital account of assessee-HUF appearing in books of UK Paint Industries, I consider it would be appropriate and reasonable to conclude that partial partition was effective only from 2nd April, 1979 and not from 30th Dec., 1978, as alleged. It seems that entries in personal books of account of assessee-HUF have been made just to claim benefit of partial partition alleged to be made on 30th Dec., 1978. In personal books of account of assessee-HUF all entries in regard to transactions of HUF have not been made. Only some of entries and that too transfer entries have only been made. It is thus clear that personal books of account alleged to have been made by assessee-HUF have not been kept from day to day or in ordinary course of business of HUF." In event, ITO held that partial partition made on 2nd April, 1979 would have no effect with regard to assessment of income of assessee- HUF in view of provisions of cl. (b) of sub-s. (1) of s. 171 of IT act, 1961 ('the Act), which in effect provided that partial partition claim if effected after 31st Dec., 1978 should, be ignored for purpose of assessment to income-tax of income of family. 5. assessee challenged correctness of above finding of ITO before learned AAC, who accepted assessee's plea that books of account of HUF had been maintained by assessee in normal course of his business and, that, therefore, entries made therein on 30th Dec., 1978 constituted valid partial partition of assets of family to extent of Rs. 1,50,000. Department challenges correctness of above finding of learned AAC through this appeal. 6 . After examining books of account of family, which have been maintained by assessee, and in absence of any particular instance to show that same had not been maintained by family in normal course o f its business, we have no hesitation in confirming finding of learned A C that said books had been maintained in normal course of its business and that entries in capital account of family were in fact made on 30th Dec., 1978, showing allocation of Rs. 50,000 to minor son and of Rs. 1 lakh to Karta and his wife jointly. This position is evidenced by deed of partition also duly witnessed by independent witnesses. 7. question, however, remains as to whether by passing aforesaid entries it can be said that partial partition of family assets has taken place. Sec. 171 deals with question of partition of HUF. According to explanation to said section : "(a) 'partition' means (i) where property admits of physical division, physical division of property, but physical division of income without physical division of property producing income shall not deemed to be partition; or (ii) where property does not admit of physical division, then such division as property admits of, but mere severance of status shall not be deemed to be partition; (b) 'partial partition' means partition which is partial as regards persons constituting HUF,, or properties belonging to HUF, or both." From definition of partition given above, it is clear that, for purposes of Act, mere severance of status with regard to certain assets of excess of assets over liabilities is not enough to constitute valid partition of family. It is also clear that what has to be partitioned amongst members of family is property or asset in question and not shares in value of said asset amongst various members. If physical division of asset or property is not possible only then another mode of division as property may admit or has to be resorted to. Thus, if family has interest in firm as partner, physical division of said share in partnership amongst various members of family may not be possible, and, in such situation, division of said share can be done by making book entries showing division of said share amongst various persons in given manner. But partition has to be of given asset or property and not of net worth (or part of it) and before it can be said that there has been partition of family, it is necessary for family to spell out property or properties in question in respect of which claim of partial partition has been made. If family has not defined properties which have to be partitioned in partial partition of family and it is merely part of value of assets of family in excess of liabilities of family, which would be net wealth of family that is being sought to be partitioned amongst family members, it may be valid partition under Hindu law, involving severance of status of members in question, but, for purposes of Act, said partition would not be valid partition, for definition of partition, as given in Explanation to s. 171, specifically requires that properties, which have to be partially partitioned, must be specified and said properties should be physically partitioned amongst members in question, and only, if there be some property, which is not capable of physical division, said property should be divided by some other mode which property may admit of. In present case, unfortunately, as on 30th Dec., 1978, family did not indicate property which was to be divided amongst members of family. It merely indicated that out of capital of family, which meant excess of total value of assets of family over total liabilities of family as on that date, i.e., 30th Dec., 1978, Rs. 1 lakh would be given to Karta and his wife jointly and Rs. 50,000 would be given to his minor son. This is creation of two debts against net wealth cannot be regarded as partition of any of properties of family. partition in sense in which said term has been defined under Explanation to s. 171 was ultimately done by family on 2nd April, 1979, when one of properties of family, namely, family's interest in partnership firm UK Paint Industries, was partitioned to extent of Rs. 1,50,000 amongst members of family as indicated above. Inasmuch as said property could not have been physically divided, above mode of division was only mode possible and so, ITO was justified in holding that partial partition of interest of family in aforementioned firm was done on 2nd April, 1979 and that by declaration in entries dt. 31st Dec., 1978, no partition in terms of s. 171 took place, though under Hindu law, there might have been valid partition thereby amongst members of family. It is settled principle of law now that one has to bear in mind different notions of partition of HUF, one under Hindu law and other under income-tax law and that it would not be correct to hold that partition had taken place in family in terms of s. 171 merely because such partition under Hindu law had taken place. For purpose of Act, one must see further as to whether partition in question in sense in which said term has been defined under Explanation to s. 171 has taken place or not. If any authority for this proposition is needed, we may refer to decision of Hon'ble Supreme Court in case of Kalloomal Tapeswari Prasad (HUF) vs. CIT (1982) 26 CTR (SC) 415(1982) 133 ITR 690 (SC) which lucidly brings out above position in law. In view of this, we reverse order of AAC and restore that of ITO. 8. Departmental appeal, accordingly, succeeds. 9 . result of above finding on quantum assessment would be that income derived by family from alleged assets partitioned, namely, Rs. 1,50,000, would continue to belong to HUF and income derived therefrom would be assessable in hands of assessee. finding of AAC to contrary is erroneous and is hereby reversed. What is exact income derived from utilisation of partitioned amounts should, however, be ascertained by ITO with reference to books of account of parties wherein said money has been deposited by coparceners in question. ITO, instead of finding out real income earned with help of partitioned assets, has estimated income from them, while completing assessment for asst. yr. 1981-82. It is not proper. We, therefore, set aside order for asst. yr. 1981-82, and restore matter back to ITO with direction that he would redetermine income of assessee after ascertaining income which might have been earned on divided assets. T h e assessee would lead relevant evidence before ITO in his own interest. learned counsel for assessee in fact promised that mush before us and we do hope that assessee would keep up this promise. With these directions, we set aside orders of ITO for asst. yr. 1981-82 and restore same to him for fresh assessment in accordance with law. 10. For statistical purposes, we will treat this appeal also as allowed. *** INCOME TAX OFFICER v. SOHAN SINGH DHINGRA